Problem $6-63($LO$.4,5)$

The stock in Ivory Corporation is owned by Gold Corporation $(80\%)$ and Imelda $(20\%).$ Gold Corporation purchased its shares in Ivory nine years ago at a cost of $$650,000,$ and Imelda purchased her shares in Ivory four years ago at a cost of $$175,000.$ Ivory Corporation has the following assets that are distributed in complete liquidation:

Adjusted Basis Fair Market Value

Cash $$600,000$ $$600,000$

Inventory $80,000200,000$

Equipment $350,000200,000$

Question Content Area

a$.$ Assume that Ivory Corporation distributes the cash and inventory to Gold Corporation and the equipment to Imelda. Indicate whether the following statements are "True" or "False" regarding the tax consequences of the distributions to Ivory Corporation, to Gold Corporation, and to Imelda.

$$ Code $332$ applies to the liquidation, and Ivory Corporation recognizes no gain on the distribution of the cash and inventory to Gold Corporation.

$$ Ivory recognizes the $$150,000$ loss realized on the distribution of the equipment to Imelda.

$$ Gold Corporation recognizes no gain or loss on the liquidation and takes a basis of $$80,000$ in the inventory.

$$ Gold's basis in its Ivory Corporation stock is eliminated.

$$ Imelda recognizes a gain of $$25,000.$

Question Content Area

b$.$ Assume that Ivory Corporation distributes the cash and equipment to Gold Corporation and the inventory to Imelda. Indicate whether the following statements are "True" or "False" regarding the tax consequences of the distributions to Ivory Corporation, to Gold Corporation, and to Imelda.

$332$ applies, and Ivory recognizes no gain or loss on the distribution of the cash and equipment to Gold Corporation.

$$ Imelda recognizes a gain of $$25,000.$

$$ Ivory Corporation recognizes the gain of $$120,000$ on the distribution of the inventory to Imelda.

$$ Gold Corporation recognizes no gain or loss on the liquidation and takes a basis of $$200,000$ in the equipment.

$$ Gold's basis in its Ivory Corporation stock is eliminated.